Tag Archives: insurance business

Training the Future Claims Adjuster

Unless you’ve been frozen in carbonite for the past 15 years, you’re probably aware that the insurance industry is facing two imminent HR crises:

  1. A Brain Drain– Twenty-five percent of the industry workforce is expected to retire by 2018, according to Insurance Business America. But wait! It gets better. In addition to filling vacancies caused by attrition, companies will have to recruit workers to staff the 200,000 new jobs the Bureau of Labor Statistics expects the industry to create by 2022.
  1. An Enthusiasm Gap– Even today, the industry is struggling to attract young talent. According to a 2012 study by the Griffith Insurance Education Foundation, only 5% of Millennial students describe themselves as “very interested” in working in the insurance industry. When it comes to considering a career as a claims adjuster, the “Y” in Generation Y stands for “yawn.”

Two Problems, One Solution

I believe new and emerging information technologies will play a critical role in overcoming both the Brain Drain and Enthusiasm Gap.

Many young people would rather view an endless loop of piano-playing cat videos on YouTube than work as a claims adjuster. Or so they think

With the imminent arrival of usage-based insurance, there is a lot of excitement developing in the underwriting sector, and I believe the same level of enthusiasm will also attach to technologies such as cognitive analytic computing. These new technologies are innovative. They’re challenging. They’re fun.

More important: Technologies like cognitive computing will change the very nature of the claims adjuster’s job – from one that requires a fair amount of dull administrative tasks to one that places much more emphasis on analysis, creative problem-solving and people skills.

Skills Will Trump Experience

In the future, we’ll see fewer claims adjusters in the workforce, but this smaller pool of talent will be trained in a different ways and in different skillsets than previous generations. Tomorrow’s adjuster will not possess – and will not need – the wealth of experience, knowledge and (to some extent) skills as today’s adjuster. Instead, new technologies will provide them with the tools to instantaneously obtain that knowledge, experience and skill.

The future adjuster won’t be trained in many of the manual and repetitive tasks his predecessor had to learn. Tasks with little or no value will be automated. Rather, the adjuster will have to be tech-savvy. She will have to know how to analyze information because, even with the help of cognitive computing, she’ll still need to analyze reams of information – data related to vehicles, collision-avoidance technology and event data recorders.

She will also have to be familiar with product liability issues. When self-driving cars become commonplace, adjusters may not be dealing with losses involving driver fault. Instead, they may encounter instances in which the vehicles malfunctioned – product-liability claims – and will have to know how to process claims with vehicle manufacturers and the suppliers of advanced collision-avoidance systems. Future adjusters will need to tap skills and knowledge that their forbears never dreamed of.

Tech-Savvy and People-Savvy

Future adjusters will have to be much more tech-savvy, even though they’ll be responsible for performing fewer tasks. At the same time, they’ll need superior people skills to ensure that customer service isn’t lost amid increasingly automated processes. Although the industry will automate many tasks, and many customers will be pleased with this development, customers are already demanding higher levels of customer service. The “personal touch” isn’t just a side benefit: It’s often the main driver behind a consumer’s decision to choose one carrier over another.

So adjusters of the future will be people who are very customer-oriented, very tech-savvy, very intelligent and very skilled at interpreting mountains of data. They won’t have to perform a lot of clerical and administrative tasks. Automation will virtually eliminate that work. But they will have to know how to optimize new technologies to deliver superior customer service and the best possible outcome to every claim.

We in the claims industry have to find ways to inspire, energize and interest young people in careers as claims adjusters. Currently, this isn’t a vocation many Millennials seek. With the help of new and emerging technologies, however, we can be seen as a fun, innovative and inventive sector that adds value to the lives of ordinary people. After all, getting into accidents causes a great deal of stress for most vehicle owners. For that reason, our industry needs adjusters who are adept at a wide variety of claims-processing and customer-service challenges.

Voice of the Customer: They’re Not Happy

Early in November 2014, immediately following the release of the SMA research report Crowdsourcing and Open Innovation: Powering the Sharing Economy, which explored the shared economy and its implications for insurance, I received an interesting email from the CEO of a shared shipping start-up. The CEO stated, “I just wanted to let you know that I have found the hardest problem to solve as the CEO is that, after talking with 12 different insurance companies, I am still stuck on finding someone to write a policy for me! I am not sure you can overstate the tsunami of change that insurers are trying to avoid. It is frustrating to me as a CEO trying to get my company going.”

My instant reaction was … what a powerful voice, and what a compelling, if troubling, customer statement! I immediately reached out to him to discuss his predicament.

In our SMA research, we have written about how the shared economy is empowering individuals and businesses to access specialized skills, resources, goods or services from anyone, anywhere, at any time based on an instantaneous need. The change is spawning new business models and leveraging the combination of crowdsourcing, open innovation and technology. These new business models are challenging decades of business assumptions, models, pricing and growth that were based on the principle of ownership, rather than access or subscription. As a result, the fundamentals of insurance, from risk models to pricing, products and services, are feeling shockwaves. My discussion with the CEO about his business provides a great but jolting example of the need for these new business models, new risk models and (especially) new insurance products. He agreed to do a webinar to describe his needs and his frustrating experiences for our SMA Innovation Communities.

During the webinar, the CEO shared his experience and powerful insights for insurers:

It was easier to obtain $2 million for investment funding than to find insurance. The funding would likely be completed within 30 days. Contrast that with finding insurance coverage: After talking to more than 20 insurers, brokers or agents, over nearly 12 months, there is still no coverage. He found two companies, one of which works with Peers (the non-profit company backed by shared economy companies), that are bringing insurance to this market segment. But he is still awaiting confirmation.

Outdated insurance business models don’t fit today’s market needs. The old models are based on historical actuarial models, rather than real, point-in-time data (i.e. coverage when driving and shipping something). The lack of visibility into capabilities of insurers and independent agents and the language barrier (the coverage needed is inland marine, which implies the use of a boat rather than land surface shipping) make it especially difficult to find exactly the right coverage.

Finding the right independent agent is “tricky” because of referral chains, lack of skill sets, unclear representations, and agent incentives. In seeking coverage, he was told by many in the industry that, “Insurance has not updated the business model since the 1800s, so you won’t find anything.”

What does this mean for the insurance industry? Mildly put, listening to the voice of the customer should be a wake-up call. The lack of understanding and inability to respond rapidly to new market needs opens the door to new competitors and the potential loss of customers.

Just like many other industries that are being disrupted and transformed, insurance must reimagine its business models – from the mission to the customer to the product, pricing, operational and revenue models. Historically, insurance has been about the transfer of the risk of a loss from one entity to another in exchange for payment. In today’s fast-paced, changing world of emerging technologies, new business models and shifting industry boundaries, is that focus limiting our opportunities? This experience by a “could-be” customer clearly suggests we are at least limiting our future, if not risking it altogether.

Other industries (and companies) are noticeably redefining their visions and focus to compete in this new world. At the 2015 Consumer Electronics Show, the media noted that Ford CEO Mark Fields sees Ford as rethinking itself as a mobility company rather than being defined by its legacy as an automotive company, and Ford is delivering a wide array of new services and experiences via the auto. Even Google’s CEO, Larry Page, has acknowledged that its vision statement – “To organize the world’s information and make it universally accessible and useful” – is too narrow, as reported in a Nov. 13, 2014, Fortune magazine article, “Google’s Larry Page: The most ambitious CEO in the universe.” Page is creating a future by leveraging emerging technologies to reshape the business beyond the legacy as a search engine.

Yet the view that insurance vision and business models are shackled in decades or even centuries of tradition is, unhappily, very real. This notion is reinforced in a Jan. 21, 2015, Forbes article titled “Insurance: $7 Trillion Goliath” that compares banking with insurance relative to change and innovation. The article notes that 15 years ago banking was a lumbering, vertically integrated giant that was largely untouched by the technology revolution. Today, however, there are a group of “Davids” like CoverHound, Lending Club and Square that are challenging traditional banking “Goliaths” with some digital “slingshots.” The article further observes that insurance has also remained largely untouched by the technology revolution, but that we are beginning to see the emergence of “Davids” who will challenge the traditional “Goliaths,” leveraging the technology revolution to disrupt the traditional business assumptions and models of insurance.

Insurers must redefine their vision and reinvent their business model, taking into consideration the new and emerging technologies, the growing amount of real-time data, new market trends and much, much more. If they do not, they risk facing a disruption that will be devastating, when it could have been transformational, creating new relevance in a rapidly changing world.

The reimagination of businesses in the context of today’s world and tomorrow’s potential are already defining and revealing future market leaders and winners. Will insurance remain focused on risk transfer products? Or will we look more broadly toward offering products and services that provide much more, enhance the lives or businesses of our customers and meet the needs of a reimagined business model, like the shared economy?

The possibilities are significant. Are you reimagining your business, considering the impossible as the new possible? Insurers need ingenuity and outside-in thinking to reimagine their business as a Next-Gen Insurer and ignite a vision of possibilities.

If not you, then someone else will. So dream the impossible and become a Next-Gen insurer

Overcoming Newton's Laws

Like many companies in many industries, and practically every human being I know, the insurance world can be change-resistant. We fight natural laws even as we recognize the very need to adapt and grow. When it comes to adopting technology — a topic I hope to explore in future contributions here — change is particularly difficult.

So how do you get your organization to change, to adjust, to transform? How can you promote and ensure a change in direction or propel a faster change? A few key lessons found in Newton's Laws can shed light on some good answers.

In 1687 Sir Isaac Newton published his work, Philosophiæ Naturalis Principia Mathematica, what we commonly call Newton's laws of motion. I am sure you remember Newton's laws of motion? Here's a layman's version (with apologies to Sir Isaac):

  1. First law: A body (mass m) in motion stays in motion unless it is acted upon by an external force (F). Picture a big boulder rolling down a shallow slope, just enough slope to keep the boulder rolling but not enough for the boulder to gain speed.
  2. Second law: A body will accelerate if pushed in the same direction as it is moving, i.e., F = ma (we'll need the formula later; I know, you were told there would be no math). Same boulder, now rolling slowly so you catch up to it and push it from behind, causing it to go faster.
  3. Third law: The forces of action and reaction between two bodies are equal and opposite. This means that whenever a first body exerts a force F on a second body, the second body exerts a force -F on the first body. F and -F are equal in magnitude and opposite in direction. Our boulder example again, only this time it runs into another boulder, which causes the first boulder to slow or stop and the one it hit to steer off in the opposite direction of the hit.

So that's what you already knew. What I bet you didn't know is that Sir Isaac Newton spent a lot of time at Edward Lloyd's coffee shop in London (Lloyd's of London). Sir Isaac was a professor, after all, and was nothing if not observant. For years he listened in on the conversations of insurance professionals as they talked about their businesses while sipping his nonfat vanilla lattes. He soon postulated the three laws of business:

  1. First law: A business (mass m) will remain on its course, good or bad, profitable or unprofitable, forever if no new forces act upon it.
  2. Second law: The larger or older a business is (big mass m), the more force (change agent F) it will take to accelerate its course.
  3. Third law: If a force (F) is exerted on a business (mass m) to try to change its course, expect some pushback (-F).

Sound familiar? Think about your own organization. Now do these “laws” ring a bell?

It is important to note that I love the insurance business and have been studying the industry from the inside for 34 years. That said, I do think Newton's laws of business have a stranglehold on our industry. While there are exceptions, many companies are in a “state of uniform motion,” and too many companies struggle to change course. Still others try but are forced to give up when change is not well received by those affected.

So what can an organization do to overcome Newton's laws or, in reality, use the laws to their advantage? Let's tackle them one at a time.

First Law in Action
Insurance is cyclical: soft and hard markets, profitable and unprofitable cycles. The common response is, “That's just the way it is, and we can't do anything about it.” To change speed or course requires a strong desire and some planning. It also requires an understanding of your mass m (your “boulder”, i.e., your company).

As Davenport and Harris state in Competing on Analytics: The New Science of Winning, you must know what you are really good at; that is, you must know your distinctive capability. So how do you get a deeper understanding of who you are as a company? How do you discover what you are really good at? You do the analysis — identify your team's talents and limitations; understand what your profitable and unprofitable clients “look like”; determine how and where you make money (or not); pin down your processes; know what additional corporate assets you have to work with; and so on.

Use all the technology tools available, including data analytics, descriptive and predictive modeling, and sometimes, outside help. You really need to understand the composition of your “boulder” and the nature of the landscape it is rolling down, including the other boulders (competition) that you may run into.

Second Law in Action
“We have always done it this way.” It pains me to even write that statement. In a young organization, you don't hear this statement that often, if at all; everything is new. There are no “habits.” Brand new companies are more like a handful of pebbles thrown down the hill than they are boulders. The smaller the mass m (the company), the less force required to change its course; Newton's second law of business.

And generally the larger and/or older the company, the greater the mass m = greater force required to change course. So if you hear, “We have 2,000 claims people scattered across the country; changing will be impossible,” ask yourself, will it really? Sure, change will be hard, maybe really hard. Therefore, F just needs to be larger, making the achievement that much more rewarding.

Here is where talented leadership is very important. Gain a following first (a big part of being a leader), paint a clear picture of where and how fast you want your boulder to roll, and people will get behind and push. Once the momentum picks up, you may encounter many competing forces; therefore, put some governance in place so the most important projects get everyone's attention. And have strong project management to keep the force applied in the right direction. Strive for quick, small successes so people “see” progress. People in IT will help you; they are trained in the discipline of managing projects and portfolios of projects.

Third Law in Action
You have taken a good assessment of your company, you have good leadership in place, and you have charted a new course and speed. You initiated projects with governance in place to assure they are the “right” projects. Everything is rolling along, but Newton's laws are still present. Now the troops start pushing back.

People tend to know the third law best. Proactive collaboration with your teams goes a long way to overcoming human pushback. When people participate in the process and know what they are doing, -F is minimized. Business intelligence and analytics can help here, too — even something as simple as who is using what technology and how often. Metrics on adoption are great.

Eight Steps For Leveraging Newton's Laws Toward Positive Change
Changing course isn't easy. The larger or older an organization is, the harder the course change. Quality change management is worth its weight in gold (even at today's price), and these eight steps can help.

Step 1 — Understand your “boulder.” Get outside help if you aren't really good at introspection. Analyze past history. If you buy into Newton's laws, your history will repeat itself unless acted upon by an “external, unbalanced force.” Today's technology provides unprecedented capabilities to study historical data in ways that were not possible (or at least were really hard to accomplish) just a few short years ago. There are so many ways to gather data and analyze the buyers of your products. Make sure you know your current business and your market.

Step 2 — Recognize that Newton's first law of business exists and that change requires hard work and good, strong leadership. It fact, leadership is the most important aspect needed for changing course. Effective leadership at the top is a must, but it's also a required factor of others who lead people in your company.

Step 3 — Determine your new direction. Use what you learned in Step 1 to establish the speed you want your boulder to go and in what direction. Once you know in which direction to head, you must figure out how to shove your boulder with the right amount of force. Typically, you must shove it hard to get it to change course, pick up speed, or both.

Step 4 — Recognize that talented leadership can exert a significant force. Talented leadership involves cultivating a following of believers, so that the third law is minimized and your team will eagerly follow the new course. It means painting a clear picture of where you want your boulder to roll. Your team must know the “destination” so they can help move your team, department, and company toward it.

Step 5 — Get governance in place. When an organization has bought into change, really bought into it, then there can be many competing forces. Governance must be strong so the “right” forces affect the direction of the company. Governance helps by identifying which way to “push” and ensuring the right amount of force. Remember the first real law: the force has to be unbalanced. If competing projects cancel each other out, the boulder will keep rolling in the same ol' direction, at the same constant (probably slow) speed.

Step 6 — Establish strong project management. A new course is set; the proper force is applied, and is applied in the right direction. Now the change must be monitored. Leadership should be kept informed. Course corrections may be required. It's all part of good project management. At my firm, we are huge Agile Methodology zealots (that's redundant). Breaking the work into manageable chunks and keeping people informed are great ways to accomplish what needs doing. It also helps to address the third law. People like to “see” progress and feel a sense of accomplishment.

Step 7 — Don't forget your people. People are subject to Newton's Laws too. Make sure you have human change management in place. Proactive collaboration with your teams goes a long way to overcoming human pushback. Train early and train often. When people participate in the process, know what they're doing, and understand what's expected, then -F is minimized.

Step 8 — Assess and amend. It is so easy to get off course, since there are many forces F and -F exerting influence on your company, both internally and externally. As you work to change or accelerate course, Newton's Laws will always be in play. Making adjustments as you go is critical to success.

Conclusion
Change is inevitable, whether you're changing your boulder's course or letting your competitors' boulders get in the way. But change can also be fun.

Over the course of 34 years, I have been called many things; one of the good ones is a change agent. I hope this article will help you change your organization in many positive ways. When you think about change, remember Newton's Laws and let them guide your actions. Embrace change. You can make it happen.